Energy farm in your future?

Elton Robinson, Farm Press Editorial Staff | Jun 04, 2007

Is it possible for farmers to participate more directly in the ethanol boom — to derive additional income not just from high grain prices, but from the sale of ethanol itself? Is there an energy farm in your future?

According to those familiar with small-scale ethanol production technology, much of the know-how currently exists for small-scale ethanol plants in which a farmer or group of farmers would not only produce ethanol on-farm from either sweet sorghum or sugarcane, but also grow the feedstock.

So-called energy farms could be the wave of the future, or not, but one thing is clear — it’s one way for American farmers to benefit from the race to replace 15 percent of gasoline with biofuels over the next decade.

Currently, there are three technologies for producing ethanol. First is the current starch-based platform based on grain. This system is already impacting farmers with higher corn, wheat and grain sorghum prices. Today, the markets are being driven by the starch-based systems.

Cellulosic or switchgrass based systems could be the Holy Grail or they could be cold fusion, according to Tim Sharp, a former Oklahoma State University professor, now part of a venture selling small-scale ethanol production equipment to farmers, cooperatives and small companies. “We’re not sure how to do cellulosic systems now and we’re probably not going to be doing it for five years at best. It offers all kinds of potential and all the university research and grant money and science is focused on it.”

The third technology for ethanol production is based on sugar and eliminates several steps needed to turn a feedstock into sugar, since the feedstock itself contains a high percentage of it. Brazil uses sugarcane as a feedstock for its ethanol. The United States, however, does not have a large dedicated acreage of the crop.

Part of Sharp’s job at OSU was researching cellulosic ethanol, but he soon became interested in sugar-based systems. Recently, Sharp left OSU to become operations manager at FASTech.

The founder of the company, David McDowell, a former automobile repair shop owner, says ethanol technology he developed can run on corn, sugar beets, molasses and sugarcane, or anything that can be turned into a sugar product.

For Sharp, the feedstock that makes the most sense for the energy farm concept is sweet sorghum. It produces 18 percent to 20 percent sugar and yields between 400 gallons and 900 gallons of ethanol per acre.

Dani Bellmer, associate professor of biosystems engineering, Food and Agricultural Products Research Center, Oklahoma State University, says sweet sorghum “can be grown just about anywhere in the United States. It has very low irrigation needs compared to corn and sugarcane and fertilizer needs are low. It’s also about the easiest way to produce ethanol there is. You press the stalks and get liquid sugar, to which you add yeast to make ethanol.

“The downside is that the sugar used to make ethanol is not storable for a long period of time. So you have to begin processing it almost immediately or the sugar in the juice will be degraded to other products.”

That’s where an on-farm ethanol plant comes into play, according to Bellmer. “You can do it for low capital costs right on the farm.”

Bellmer adds that quality control is also an issue as the ethanol produced on-farm must be 99 percent pure, one reason why she supports a cooperative effort of farmers, i.e., groups of farmers going into business.

Assuming a harvester is developed for the sweet sorghum, an ideal energy farm would have 600 acres of land, including 300 acres for sorghum production and 300 acres for rotation. According to Sharp’s calculations, such an operation would require $95,000 in total variable costs and $85,000 in fixed costs (including paying off equipment) for a total cost of $180,000. “If you produce 550 gallons per acre off 300 acres and you sell it for $2.30 a gallon, you would have $379,500 in sales, providing an annual net return of $180,000 to $200,000.

Sharp believes a government incentive, consisting of a floor price of $2.35 a gallon for the first 120,000 gallons of ethanol produced by a small-scale energy farm, would be enough to offset economic risk from falling gasoline prices. A second 120,000 gallons would have the same floor price if the feedstock (sweet sorghum or sugarcane) was grown in the United States.

OSU researchers are nearing completion of an economic study of energy farms, according to Bellmer. “If the harvest window is only three months, can you amortize that harvester over 12 months and make it worthwhile? I’m optimistic that we can at this point.”

Because ethanol contains alcohol, the U.S. Department of Alcohol, Tobacco and Firearms has expressed more than a passing interest in how a small-scale operation might be regulated, according to Sharp.

“This is where our senators and congressmen need to get involved,” Sharp says. “All the regulations for ethanol production are based on producing spirits. This is an agricultural enterprise for producing motor fuel. It may have to be some type of local cooperative for it to work, where you have business entities, which ATF is happy dealing with.”

Sharp figures that 650 farmers working 300 acres of sweet sorghum each can produce the same amount of ethanol as a 100-million-gallon, corn ethanol plant currently on-line. “But if you look at the economic impact of the small-scale plant, from a rural economy standpoint, this is where I think we need to be. Let the farmer make some of the money.

“You’re not selling the corn guy your corn, you’re selling the oil company your ethanol. So you’re getting all the added value. Currently, a corn plant costs $2.10 a gallon for production capacity. Right now, you can put in molasses capacity for around 50 cents a gallon. So our costs are less than one-fourth of those of a corn plant.”

Sharp adds that until a reliable harvester is designed for sweet sorghum, energy farms can truck in molasses for $135 to $150 per ton. Production costs for trucked-in molasses are between 97 cents and $1.14 a gallon. “If you’re running on sweet sorghum, the costs are between 70 cents and 90 cents. This is a whole lot cheaper because we have really low energy costs.”

A risk of using molasses as a feedstock could occur if production capacity is increased without ramping up molasses production. “We’d be in the same boat the corn guys are in, the price of sugar goes up big time. Then the cost of production goes up and there is less profit. On the other hand, if you’re growing your own sorghum, you’re not vulnerable to raw materials costs.”

“To be independent of foreign oil, this country needs farmers and ranchers to get involved and produce their own fuel,” McDowell said. “The corn ethanol plants need to be involved. The oil companies have to be involved on a bigger scale to build the 150-million gallon plants. It’s all needed for us to become independent of foreign oil.”

“Decentralization is a good thing, too,” Bellmer said of the energy farm concept. “The more large-scale capital intensive plants we have, the more opportunities for sabotage and other things. So the more decentralized we are, the better it is for everyone.”

Small-scale ethanol plants constructed by FASTech and being operated by farmers are running in Georgia, Indiana and Okemah, Okla. FASTech’s ethanol plant costs around $400,000, which includes tanks, a cooker, separation columns and electronics.